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  • Exam Code: 8007
  • Exam Name: Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition
  • Updated: Aug 10, 2026
  • Q & A: 133 Questions and Answers
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  • Exam Code: 8007
  • Exam Name: Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition
  • Updated: Aug 10, 2026
  • Q & A: 133 Questions and Answers
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PRMIA 8007 Exam Syllabus Topics:

SectionObjectives
Topic 1: Numerical Methods- Quantitative Techniques
  • 1. Monte Carlo Methods
  • 2. Numerical Approximation
  • 3. Optimization Methods
  • 4. Simulation Techniques
Topic 2: Calculus- Differential and Integral Calculus
  • 1. Integration
  • 2. Differentiation
  • 3. Functions and Limits
  • 4. Multivariable Calculus
Topic 3: Risk Measurement Applications- Quantitative Risk Analysis
  • 1. Volatility Modeling
  • 2. Portfolio Risk Measurement
  • 3. Value at Risk Methodologies
  • 4. Sensitivity Analysis
Topic 4: Regression and Time Series Analysis- Modeling Techniques
  • 1. Model Diagnostics
  • 2. Multivariate Regression
  • 3. Linear Regression
  • 4. Time Series Forecasting
Topic 5: Statistical Analysis- Descriptive and Inferential Statistics
  • 1. Moments and Distributions
  • 2. Maximum Likelihood Estimation
  • 3. Confidence Intervals
  • 4. Hypothesis Testing
Topic 6: Probability Theory- Fundamental Probability Concepts
  • 1. Probability Rules
  • 2. Random Variables
  • 3. Bayes' Theorem
  • 4. Conditional Probability
Topic 7: Linear Algebra- Matrix Methods
  • 1. Positive Definiteness
  • 2. Covariance Matrices
  • 3. Eigenvalues and Eigenvectors
  • 4. Matrix Operations

PRMIA Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition Sample Questions:

1. Which of the following is consistent with the definition of a Type I error?

A) The probability of a Type I error is 100% minus the significance level
B) A Type I error would have occurred if the performance of a stock was positively correlated with the performance of a hedge fund, but in a linear regression, the hypothesis of positive correlation was rejected
C) A Type I occurs whenever data series are serially correlated
D) A Type I error would have occurred if the performance of a stock was positively correlated with the performance of a hedge fund, but in a linear regression, the hypothesis of no correlation was rejected


2. You intend to invest $100 000 for five years. Four different interest payment options are available. Choose the interest option that yields the highest return over the five year period.

A) an annually compounded rate of 4.15%
B) a lump-sum payment of $22 500 on maturity (in five years)
C) a quarterly-compounded rate of 4.1%
D) a continuously-compounded rate of 4%


3. The quarterly compounded rate of return is 6% per annum. What is the corresponding effective annual return?

A) None of the above
B) 6%
C) 1.50%
D) 6.14%


4. Which of the following is a false statement concerning the probability density function and the cumulative distribution function of a random variable?

A) the CDF approaches 1 as its argument approaches infinity.
B) the PDF is non-negative.
C) the definite integral of the CDF from minus infinity to plus infinity is undefined.
D) the definite integral of the PDF from minus infinity to plus infinity is zero.


5. If the annual volatility of returns is 25% what is the variance of the quarterly returns?

A) None of the above
B) 0.0625
C) 0.1250
D) 0.0156


Solutions:

Question # 1
Answer: B
Question # 2
Answer: C
Question # 3
Answer: D
Question # 4
Answer: D
Question # 5
Answer: D

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